FDI November 2023

Key Points:
FDI above 50 for two consecutive months. The seasonally adjusted November FDI (53.4) improved from last month (52.6) and marked the second consecutive month of growth (>50). While the FDI has registered a handful of growth readings throughout 2023, the last time the index posted two consecutive >50 readings was June 2022 – perhaps suggesting a real change in underlying demand trends rather than another head fake or anomaly. M/m growth was driven by an improved seasonally adjusted sales index (63.0 vs. 52.6 last month), the employment index (improved to 55.9 from 51.6), and customer inventories (54.4 from 51.6 in October). Respondents indicated they saw growth in bookings and strong daily sales numbers: “I was very surprised this month as daily sales numbers added up more quickly than usual. Nice result.” 35% of respondents indicated sales came in above seasonal expectations (October 44%). Another 38% said sales were in line (22% last month), while just 26% saw weaker sales than expected (October 34% and 2023 YTD average 39%).

FLI breaks through to growth. The FLI also saw sequential improvement, coming in at 50.4 vs. 47.1 last month. The FLI had gradually climbed towards 50 from a low of 37.8 in April, but this month marked the first growth reading for the index since July 2022. Higher employment levels and a significantly more positive six-month outlook drove the improvement. On the outlook specifically, 47% of respondents predicted higher activity six months from now vs. today compared to just 25% last month. The percentage anticipating similar activity was 29% compared to 47% in October, while the percentage expecting softer activity was 24% (last month 28%). This drove the six-month outlook index to register 61.8 vs. 48.4 last month.

Noticeably more optimistic tone struck this month. For the second consecutive month, we noticed commentary leaned more optimistic on balance than pessimistic. Stabilization and/or growth in bookings for both October and November have many feeling more positive: “Even though we continue to get mixed signals from customers overall, the past two months have produced positive gain in bookings, and invoiced sales should continue to increase over the next six months. Positivity is starting to grow concerning the short-term outlook for our organization.” Another respondent also saw good momentum: “Business is brisk! This will be our BEST November in company history with record shipping and booking. No sign of slowdown.” Others are seeing more of a stabilization than acceleration but even this is viewed as encouraging: “The slowdown finally steadied. Incoming orders starting to pick up a bit. Inventory is arriving at the fastest pace in the past three years. Factories overseas are slow, and pricing is coming down, even stainless.” Looking forward, the full-year 2024 outlook is murky but “slow growth” could be achievable: “There is still some uncertainty what market conditions will be like but leaning to slow growth for the year with first half slower and picks up [in] second half.” Outside of the market/economy, some feel company-specific performance could drive solid results in 2024: “We see higher sales in the next six months more due to new business than due to increases from current business.” On the negative side, the upcoming election is seen as posing some risk to sentiment/business conditions: “ I wish 2024 wasn’t an election year!”